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Volatility Co-Movement of Asean-5 Equity Markets

  • Swee-Ling Oh

    ()

    (TA Securities Berhad, Kuala Lumpur)

  • Evan Lau

    ()

    (University Malaysia Sarawak)

  • Chin-Hong Puah

    ()

    (University Malaysia Sarawak)

  • Shazali Abu Mansor

    ()

    (University Malaysia Sarawak)

Economic cross-linkages and the increased co-movement of asset prices across international markets are important outcomes as the result of globalization. Hereby, the nature of international stock markets and the extent to which the 1997-1998 East Asian turmoil had affected the market relationship of five countries of Association of Southeast Asian Nations (ASEAN-5) remain as probing questions. Using an array of econometrics analysis upon the stock price volatility series, we found partial market integration for the pre-crisis; whereas in the post-crisis, complete integration prevails. Hence, the financial meltdown in 1997 is said to be a contagion led crisis as markets integrate well off after the crisis than prior to it. Nonetheless, long run portfolio asset diversification benefits across the ASEAN-5 basin are reduced as markets are integrated in both the pre- and post-crisis. As such, the formation of the ASEAN Investment Area (AIA- 1998) parallel with the establishment of a developed ASEAN Index-Financial Times Stock Exchange (FTSE) regional index is viable to foster deeper regional market convergence.

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Article provided by ASERS Publishing in its journal Journal of Advanced Studies in Finance.

Volume (Year): I (2010)
Issue (Month): 1 (June)
Pages: 23-30

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Handle: RePEc:srs:jasf12:3:v:1:y:2010:i:1:p:23-30
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